Inside the Competition Bureau’s focus on digital ads

Influencer marketing seems to be an area due for enforcement action, as are claims related to COVID-19.
Businesspeople At Meeting

Several marketing practices were already at the forefront of the Competition Bureau’s plans to help Canadians protect themselves from fraud and improving their trust in the online marketplace. The last few weeks have also made that focus a public health matter.

This past Friday, Commissioner Matthew Boswell released a statement detailing how the Bureau would be on high alert for anyone who attempts to take advantage of consumers and businesses during the COVID-19 pandemic, including deceptive marketing practices about a product’s ability to prevent, treat or cure the virus, as well as collusion by competing businesses for price-fixing or gouging. This comes weeks after the U.S. Food and Drug Administration and Federal Trade Commission announced the first round of warning letters had been issued for “unapproved products intended to prevent or treat” COVID-19. An Ontario-based holistic clinic was among seven North American companies warned by the U.S. authorities to stop selling products with these kinds of claims.

The Bureau’s focus on deceptive businesses in the digital economy came to the forefront shortly after Boswell was appointed acting commissioner of competition in March 2019. Boswell’s activities over the last year have shown that “active enforcement in the digital economy would be an area of primary focus for the Bureau during his [five-year] term,” something Josephine Palumbo, deputy commissioner of the deceptive marketing practices directorate at the Bureau, laid out in a speech at the Canadian Institute’s 26th Annual Advertising and Marketing Law Conference on Jan. 22.

Homing in on the digital economy is something Boswell noted in the Bureau’s strategic vision for the next four years. When the plan was released, the Canadian Marketing Association noted that while these focus areas would seem to apply to less scrupulous organizations, marketing departments of all sizes should be on notice, due to other areas of enforcement the Bureau has been focused on recently, such as influencer marketing and greenwashing. But despite the need to be diligent, this focus will likely be a net positive for the industry as a whole.

“They [these enforcement priorities] will improve business overall,” says Ron Lund, president and CEO of the Association of Canadian Advertisers (ACA). “If the landscape is cleaned up, it can only help the good actors in the industry. If the government gets rid of the bad players through their efforts, then it creates a better and more open, transparent marketplace for the good guys to be practicing in.”

Lund is not saying that the industry is filled with deceit, but could always improve its transparency, especially when it comes to media transparency. That’s an area the ACA works “very hard at” – from how digital ad buys work to who’s involved in the total value chain. “We’re troubled by bots. We’re troubled by the ability measures – so we work hard to pull back the kimono on those things…to ensure that we’re getting transparency within our media buys.”

Palumbo noted in her speech in January how, from April to September 2019, the Bureau launched 16 new cases pertaining to the digital economy, bringing the total number of active cases to (at the time) to 37.

Michael Binetti, a managing partner at Toronto-based law firm Affleck, Greene McMurtry, says the Bureau has always been concerned with dishonest, false or misleading forms of marketing and advertising, but says this is the first time they’ve stated a focus on those claims in the digital space, given how quickly the digital economy continues to grow. Binetti is also a member of the industry self-regulatory body Ad Standards and acts for companies subject to competition investigations and class actions.

Binetti divides the Bureau’s recently-stated priorities into two big buckets. The first would be hiding the fact that something is an ad (or “adequate disclosure”); the second one is “outright lies,” consisting of things like fake online reviews, dishonest information about data privacy and dishonest price claims. “For marketers, if you lied, it will catch up with you, eventually. Frankly, that doesn’t seem to be much of a difference when you compare traditional marketing and digital marketing – that a lie, is a lie,” he says.

But Binetti says adequate disclosure seems to be more pertinent to the digital space. “If you had a 25-foot billboard, you can’t say there wasn’t sufficient space to adequately disclose a material connection. Digitally, if you see a social media post, it might not be as clear,” he says. While paid posts on social media are clearly marked as paid for, it becomes less apparent when an influencer is involved. “If you want to know where the Bureau is going, just look at how many times they talk about something. They’re taking an active interest in adequate disclosure and influencer marketing. The writing is on the wall. They’re going to take enforcement.”

In December, the Bureau said it had sent 100 letters to agencies and advertisers after a review of their influencer marketing practices, though has not disclosed which companies were sent letters or if an enforcement action has been taken as a result.

Historically, there have been more complaints related to Clause 1 of the Canadian Code of Advertising Standards (which covers accuracy and clarity of claims) and Clause 3 (which covers price claims) than complaints from any other category. According to Ad Standards’ annual reports, complaints upheld by Ad Standards’ independent Standards Councils (regarding clauses 1 and 3) have gone up from 25 (regarding 23 ads) in 2016 to 320 complaints (regarding 27 ads) in 2018.

In terms of how he sees things playing out with the Bureau’s new enforcement priorities, Binetti says he’s waiting to see who the Bureau’s first round of targets are. “Are they going after the advertiser? Or are they going after the company who buys the advertising services?”

For Steve Szentesi, a Toronto-based competition and advertising lawyer, the impact for his major brand clients is that they’re “paying a lot more attention” to complying with disclosures for influencer marketing, something Ad Standards has previously attempted to give guidance to the industry on.

“When brands are engaging in influencer marketing campaigns, they are crafting guidelines for those influencers to comply with,” Szentesi says. He also has clients that are increasingly entering into agreements with their third-party influencers, to make sure that these third parties are adhering to the disclosures both the Bureau and the FTC want. Szentesi adds how he’s noticing clients in the influencer space pay more attention to the FTC’s developments.

“It’s making brands pay attention,” he says. “They’re increasing their own compliance internally and taking efforts to make sure influencers are doing so as well.”